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Before the
Federal Communications Commission
Washington, D.C. 20554
In the matter of )
)
SBC Communications Inc. ) File No. EB-00-IH-0432
)
Apparent Liability for ) NAL/Acct. No. 200132080011
Forfeiture )
)
)
)
ORDER ON REVIEW
Adopted: May 24, 2001 Released: May 29, 2001
By the Commission: Commissioner Furchtgott-Roth dissenting and
issuing a statement.
I. INTRODUCTION
1. In this order, we affirm the March 15, 2001 Order of
Forfeiture1 issued by the Enforcement Bureau (``Bureau'') finding
SBC Communications, Inc. (``SBC'') to have willfully and
repeatedly violated certain of the conditions imposed when the
Commission approved the merger application of Ameritech Corp.
(``Ameritech'') and SBC.2 We also affirm the Bureau's imposition
of a forfeiture penalty of eighty eight thousand dollars
($88,000.00) upon SBC. Therefore, we deny SBC's April 16, 2001
Application for Review.
II. BACKGROUND
2. Under the merger conditions, SBC was required to submit
specific performance data to the Commission. An independent
audit by Ernst and Young of SBC's compliance with the merger
conditions reported ``material'' violations of the merger
conditions, including ``instances of noncompliance regarding the
accuracy of performance data.''3 In addition, the auditor also
stated that SBC's ``annual compliance report did not
appropriately disclose all errors related to performance
measurements.''4 Based on the underlying data in SBC's monthly
filings with the Commission, the deficiencies in those filings
noted in the independent audit report, and the statements made by
SBC in its Assertion on Compliance5 accompanying the audit
report, the Bureau issued a Notice of Apparent Liability6 and
then a Forfeiture Order.
3. In its Application for Review, SBC raises the same
arguments it made in its Response to the NAL. Specifically, SBC
contends that: 1) the Forfeiture Order is unlawful because SBC
has substantially complied with performance reporting
obligations; 2) any noncompliance was not willful; and 3) the
Bureau's calculation of the forfeiture amount is arbitrary.
III. DISCUSSION
4. Based upon our review of SBC's Application for Review
and the record in this matter, we find no reason to reverse the
Bureau's decision in this case. Accordingly, we adopt the
reasoning of the Forfeiture Order and incorporate the same here,
with the limited additional comments below.
5. We reject SBC's contention that it has substantially
complied with its performance reporting obligations.7 Using
misleading statistics and ``apples to oranges'' comparisons, SBC
argues that its performance reports were ``near-perfect'' and
that the Bureau's finding of substantial noncompliance is
``preposterous.''8 Our examination of the data points impacted
by SBC's errors reveal that SBC has significantly overstated the
accuracy of its filings. For instance, in Attachment A to its
Application for Review, SBC compares 17 ``alleged errors'' for
January 2000 with more than 1500 ``total measures and submeasures
reported.'' A more appropriate calculation would compare the 17
types of errors described in the Forfeiture Order to the 60
performance measurements for the SWBT, PacBell, and Nevada Bell
regions. This calculation would raise SBC's non-compliance rate
to 28 percent. Moreover, each of the 17 types of errors impacted
numerous reported measures.9 Our own analysis concludes that
SBC's reporting violations in its January, 2000 report affected
546 data points out of the 2769 measures SBC reported that month
for all seven states in SBC's SWBT, PacBell, and Nevada Bell
regions. Thus, we find that almost 20 percent of SBC's data for
January 2000 was flawed. To the extent that later reports
contained fewer errors, we find that they were nonetheless part
of a pattern of noncompliance sufficient to warrant forfeiture.
6. We also reject SBC's contention that no forfeiture is
appropriate because SBC's errors represented reasonable
interpretations of the Business Rules.10 Like the Bureau, we
find that the rules at issue were clear, and that SBC
unilaterally modified these rules in the way in which it reported
the data without first obtaining the necessary permission. The
SBC/Ameritech Merger Order clearly stated that SBC was required
to obtain explicit approval from the Commission for any changes
it wished to implement in the Business Rules.11 Moreover, we
reject SBC's argument that the Common Carrier Bureau's alleged
failure to object to these unrequested changes constituted
consent to their implementation.12 The Common Carrier Bureau
informed SBC in May, 2000 that it was concerned about SBC's
failure to seek Commission approval of several changes to the
Business Rules before they were implemented and reiterated the
prior approval requirement.13 Thus, we reject SBC's argument
that its reporting of certain performance measurements in a
manner contrary to that clearly stated in the Commission's
Business Rules was reasonable.14
7. We also reject SBC's suggestion that certain of its
interpretations of the Business Rules were not only reasonable,
but were the only reasonable interpretation, i.e. that the
Bureau's interpretation was simply wrong.15 Contrary to SBC's
assertion in this regard, we find that the Business Rules for
performance measurements 4c, 12b, and 12c clearly specify the
disaggregation level to be used, and that SBC did not follow
these requirements. The auditor found material errors, and
SBC's own Assertion on Compliance confirms that there were
``disaggregation errors,'' in these measurements.16 Therefore,
we affirm the Bureau's findings.
8. We agree with the Bureau's determination that SBC
willfully and repeatedly failed to comply with the merger
conditions.17 As the Bureau correctly stated, it has long been
established that the word ``willfully,'' as employed in section
503(b) of the Act, does not require a demonstration that SBC knew
that it was acting unlawfully. Section 503(b) requires only a
finding that SBC knew it was doing the acts in question and that
the acts were not accidental. Even assuming, moreover, that we
accept SBC's argument that Midwest Radio-Television18 somehow
requires the Commission to find a lack of concern or indifference
on the part of the licensee for compliance with our rules before
we may assess a forfeiture, SBC's repeated and substantial
violations of the relevant Business Rules demonstrate a lack of
care sufficient to satisfy SBC's proffered willfulness standard.
Given the number of violations at issue, SBC has failed to
demonstrate that its conduct reflected diligence in complying
with the Commission's requirements.
9. Finally, we find that the Bureau's calculation of the
forfeiture penalty is reasonable and appropriate. Section
503(b)(2)(D) of the Act and the Forfeiture Policy Statement allow
the Commission considerable flexibility to determine the
appropriate forfeiture.19 Contrary to SBC's contention, the
Bureau was not required to limit its consideration of SBC's past
history of noncompliance to cases involving performance
measurement reporting.20 The Bureau appropriately considered
adjudicated findings of violations of the Act or Commission rules
by SBC other than violations of the merger reporting
requirements. We also reject SBC's assertion that the Bureau may
have ``double counted'' the fact that the violations were
repeated by using that fact both to determine that a forfeiture
was warranted under 47 U.S.C. § 503 (b)(1)(A) and to determine
that an upward adjustment of the base forfeiture amount set forth
in the Forfeiture Policy Statement was appropriate.21 There is
nothing unlawful or inappropriate about taking account of the
repeated nature of the violations in both contexts. In summary,
we find nothing unreasonable in imposing a $88,000 forfeiture on
a company of SBC's resources for the types of violations at issue
here.
IV. ORDERING CLAUSES
10. For the reasons discussed above, IT IS ORDERED that,
pursuant to sections 1, 4(i), 4(j), and 503 of the Act, as
amended, 47 U.S.C. §§ 151, 154(i), 154(j), and 503, the
Application for Review filed by SBC Communications IS DENIED.
11. IT IS FURTHER ORDERED THAT, pursuant to section 503(b)
of the Act, 47 U.S.C. § 503(b), and section 1.80 of the
Commission's Rules, 47 C.F.R. §1.80, SBC Communications SHALL
FORFEIT to the United States Government the sum of eighty eight
thousand dollars ($88,000.00) for willfully or repeatedly
violating the Commission's merger conditions in the SBC/Ameritech
Merger Order.
12. IT IS FURTHER ORDERED that payment shall be made in the
manner provided for in section 1.80 of the Commission's rules, 47
C.F.R. § 1.80, within 30 days of release of this order. If the
forfeiture is not paid within the period specified, the case will
be referred to the Department of Justice for collection pursuant
to section 504(a) of the Act, 47 U.S.C. § 504(a).
13. IT IS FURTHER ORDERED that a copy of this Order on
Review shall be sent by Certified Mail/Return Receipt Requested
to SBC Communications, c/o Sandra L Wagner, Vice President-
Federal Regulatory, 1401 I Street, N.W., Suite 1100, Washington,
D.C. 20005.
FEDERAL COMMUNICATIONS COMMISSION
Magalie Roman Salas
Secretary
DISSENTING STATEMENT OF
COMMISSIONER HAROLD FURCHTGOTT-ROTH
RE: SBC COMMUNICATIONS INC. APPARENT LIABILITY FOR FORFEITURE,
ORDER ON REVIEW, FILE NO. EB 00-IH-0432, NAL/ACCT. NO.
200132080011.
I respectfully dissent from the Commission's decision to
affirm the Order of Forfeiture issued by the Enforcement Bureau
(Bureau) finding SBC Communications, Inc. (SBC) to have willfully
and repeatedly violated certain of the conditions imposed when
the Commission approved the merger application of Ameritech Corp.
and SBC. I am troubled by the Commission's finding that SBC
``willfully'' and ``repeatedly'' violated the complex set of
rules imposed by the merger conditions. Although the Bureau and
the Commission find that the rules at issue were ``clear,'' I
suspect that they were at the very least open to reasonable
differences of interpretation. I would have preferred an ongoing
dialogue with SBC to reach an understanding of SBC's obligations
under the merger conditions, rather than finding a willful
violation of our rules. Although I do have continuing concerns
about the merger conditions, this is not the basis of my concern
here. Once adopted, I expect strict compliance with the
Commission's rules. But rules must be clear if they are to be
fairly enforced.
_________________________
1SBC Communications, Inc., Order of Forfeiture, DA 01-680 (Mar.
15, 2001) (``Forfeiture Order'').
2Applications of Ameritech Corp., Transferor, and SBC
Communications, Inc., Transferee, For Consent to Transfer Control
of Corporations Holding Commission Licenses and Lines Pursuant to
Sections 214 and 310(d) of the Communications Act and Parts 5,
22, 24, 25, 63, 90, 95, and 101 of the Commission's Rules, CC
Docket 98-141, Memorandum Opinion and Order, 14 FCC Rcd 14712,
14856 (1999) (``SBC/Ameritech Merger Order'').
3 See Aug. 31, 2000 Report of Independent Auditors, Ernst &
Young, LLP, at 2 (``Auditor's Report on Compliance''). This
report only covered SBC's conduct in Texas, Oklahoma, Kansas,
Missouri, and Arkansas, California and Nevada from October 8,
1999 through December 31, 1999. See also Aug. 31, 2000 Report of
Management on Compliance with the Merger Conditions
(``Management's Assertion on Compliance''), Attachment A at 13.
4 Auditor's Report on Compliance at 2.
5 Management's Assertion on Compliance; NAL at ¶ 6; Forfeiture
Order at ¶¶ 2, 4.
6 SBC Communications, Inc., Notice of Apparent Liability for
Forfeiture, DA 00-2858 (Dec. 20, 2000) (``NAL'').
7 Application for Review at 14.
8 Application for Review at i and 11.
9 See Application for Review at 11.
10 The Business Rules accompanying the Carrier-to-Carrier
Performance Plan describe the specific data requirements and
measurement standards for each performance measurement. See
SBC/Ameritech Merger Order, Appendix C, Attachments A-2a and A-
2b.
11 See SBC/Ameritech Merger Order, Appendix C, Attachment A at ¶
4.
12 Application for Review at 16.
13 Letter from Carol Mattey, Deputy Chief, Common Carrier Bureau,
to Marian Dyer, Vice President-Federal Regulatory, SBC, dated May
30, 2000.
14 See Application for Review at 17. SBC's reliance on United
States v. Rust Communications Group, Inc., 425 F.Supp. 1029, 1033
(E.D. Va. 1976), is inapposite. In Rust, the court found the
antenna input power rule at issue did not provide the licensee
with requisite notice of the specific conduct that the Commission
considered to be a violation warranting a sanction. Here, by
contrast, the Business Rules clearly specified the performance
data SBC was required to submit to the Commission pursuant to the
merger conditions.
15 Application for Review at 14-15.
16 Management's Assertion on Compliance, Attachment A at 13.
17 Forfeiture Order at ¶¶ 14-17.
18 See Midwest Radio-Television, Inc., Memorandum Opinion and
Order, 45 FCC 1137, 1141 (1963).
19 Forfeiture Order at ¶ 20. 47 U.S.C. § 503(b)(2)(D); see also
The Commission's Forfeiture Policy Statement and Amendment of
Section 1.80 of the Commission's Rules, 12 FCC Rcd 17087, 17100
(1997) (``Forfeiture Policy Statement''); recon. denied 15 FCC
Rcd 303 (1999); 47 C.F.R. § 1.80(b)(4).
20 Application for Review at 23-24. See 47 U.S.C. §
503(b)(2)(D) (emphasis added) (``In determining the amount of
such a forfeiture penalty, the Commission or, its designee shall
take into account... with respect to the violator,... any history
of prior offenses....'').
21 Application for Review at 25.